Bertinat v Sam Estephan t/a Car and Commercial Sales

[2020] NSWCATCD 26

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Bertinat v Sam Estephan t/a Car & Commercial Sales [2020] NSWCATCD 26

Hearing dates:

17 December 2019

Date of orders:

17 December 2019

Decision date:

17 December 2019

Jurisdiction:

Consumer and Commercial Division

Before:

P French, General Member

Decision:

(1) Sam Estephan trading as Car & Commercial Sales XXX Canterbury Road Punchbowl NSW 2196 Australia is to pay Eloise Bertinat Unit XXX XXX Woodlands Avenue Breakfast Point NSW 2137 Australia the sum of $4,500.00 immediately.

(2) Eloise Bertinat must return motor vehicle registration no XXX to Sam Estephan trading as Car & Commercial Sales by making it available for his collection by 24 December 2019.

(3) Eloise Bertinat must notify Sam Estephan trading as Car & Commercial Sales by close of business on 18 December 2019 of a location from which motor vehicle registration no XXX may be collected.

(4) Sam Estephan trading as Car & Commercial Sales must collect motor vehicle registration no XXX from Eloise Bertinat at the location advised by her by 24 December 2019 after providing not less than 1 day’s written notice of the date and approximate time for collection.

(5) Provided Order 4 has been complied with, Eloise Bertinat must deliver up unencumbered title, and do all things necessary to transfer ownership of the motor vehicle to Sam Estephan trading as Car & Commercial Saless by 10 January 2020.

(6) If Order 4 is not complied with, Eloise Bertinat may dispose of motor vehicle registration no. XXX after 10 January 2020 and she shall not be liable to Sam Estephan trading as Car & Commercial Sales in relation to any claim arising from the disposal of the motor vehicle.

Catchwords:

CONSUMER LAW — Motor Vehicle — Failure to comply with the guarantee as to acceptable quality — Major failure

Legislation Cited:

Australian Consumer Law (NSW)

Fair Trading Act 1987 (NSW)

Motor Dealers and Repairers Act 2015 (NSW)

Cases Cited:

Alliance Motor Auctions Pty Ltd v Saman [2018] NSWCATAP 137

Briginshaw v Briginshaw (1938) 60 CLR 336

Burton v Chad One Pty Ltd [2013] NSWDC 301

Matumaini v Automobile Industries Pty Ltd [2017] NSWCATAP 93

Medtel Pty Ltd v Courtney [2003] FCAFC 51

Miller v Minister for Pensions [1947] 2 All ER 372

Munday v Empire Auto Group Pty Ltd [2019] NSWCATAP 52

Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Eloise Bertinat (Applicant)
Sam Estephan trading as Car & Commercial Sales (Respondent)

Representation:

Applicant (Self-represented)
Respondent (Self-represented)

File Number(s):

MV 19/42025

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. 1    These are reasons for a decision in this application made and published on 17 December 2019 following a Special Fixture hearing. At the end of the hearing I indicated the orders that would be made and advised the parties that reasons for decision would be provided in due course. These are those reasons.

2. Before the Tribunal was an application by Eloise Bertinat (the consumer) for an order under section 79N of the Fair Trading Act 1987 (FT Act) that would require Sam Estephan trading as Car and Commercial Sales (the trader) to accept the return of motor vehicle registration no CT95GO and refund her the purchase price she paid him for it, which she contends was $4,500.00. The applicant contended that she was entitled to these orders because the trader failed to comply with the guarantee as to acceptable quality when he supplied the motor vehicle to her, contrary to section 54 of the Australian Consumer Law, and that this was a major failure. This application was made to the Tribunal on 17 September 2019 (the application).

Procedural history

3. The application was first listed before the Tribunal for Conciliation and Hearing in a Group List on 9 October 2019. Ms Bertinat and Mr Estephan both attended that listing of the application in person. In accordance with the Tribunal's usual practice where both parties are present in person at the first listing of an application, prior to the case being called, the parties were provided with the opportunity to attempt to resolve the dispute cooperatively with the assistance of a Tribunal conciliator. Those efforts were not successful. As a consequence, when the parties returned to the hearing room following conciliation, the Tribunal adjourned the application to a Special Fixture Hearing and issued directions to the parties for the filing and exchange of the documentary evidence that they intended to rely upon at that hearing.

Evidence

4. Both parties complied with the Tribunal's directions for the filing and exchange of evidence. The consumer's bundle was marked Exhibit A1. The trader's bundle was marked Exhibit R1. Both Ms Bertinat and Mr Estephan attended the hearing in person. Both gave oral evidence under affirmation. The parties had the opportunity to present their respective cases, to ask each other questions, and to make final submissions to the Tribunal.

5. In the course of the presentation of the trader’s case an unidentified person sitting in the hearing room stepped up to the trader's bar table and attempted to give evidence, and advocate, on behalf of the trader. I refused to permit this to occur as no written statement of any kind had been filed and served by the trader as directed by the Tribunal (see notice of orders dated 9 October 2019). This prompted another person sitting in the hearing room to step up to the consumer's bar table and attempt to give evidence on her behalf. It emerged that this was Mr Zasch Laurie who had provided a statutory declaration dated 8 October 2019 which was in the consumer's bundle evidence. However, I had been taken to that statement in the consumer's presentation of her case and Mr Estephan had not asked to question Mr Laurie. I therefore also refused to hear from Mr Laurie.

Material facts and contentions of the parties

6. The trader is a motor dealer licensed under the provisions of the Motor Dealers and Repairers Act 2015.

7. The dispute arises from the consumer's purchase of a 2002 Model BMW e46 motor vehicle registration no XXX (motor vehicle) from the trader on 17 July 2019. The motor vehicle had come to the attention of the consumer during an internet search she had conducted for motor vehicles for sale. The internet advertisement, which is in evidence, stated in part:

There are about 10 books that are all together with all the log books with full service history and also I have the last owner purchase receipt which it was purchased for $17,990 from a different car dealership about 6 or 7 years ago. Only $4,700 drive away and no more to pay is what I will sell this car for and will include roadworthy certificate and registration till 7^th August 2019 at no extra cost Very clean and tidy. It’s in very good condition …

8. The motor vehicle was sold without any Dealer Warranty because its prior usage exceeded 160,000 km at the time (238251kms or 239000kms – both are stated on the Form 5).

9. There is a dispute as to the purchase price the consumer paid for the motor vehicle. The Form 5 Dealer Notice states the purchase price as $2,500.00. However the applicant contends that the trader told her that he would insert this price to lower the registration cost payable. Under affirmation, Mr Estephan denies this and claimed that $2,500.00 was the purchase price paid. He submitted that it is implausible that the consumer paid $4500.00 for the motor vehicle because the Form 5 he attached to the motor vehicle on 24 April 2019 prior to advertising it for sale, which is in evidence, states that its cash price is $4,400.00.

10. As already noted, the internet advertisement of the motor vehicle for sale listed its sale price as $4,700.00. The consumer says that she negotiated a $200.00 discount from that price with the trader at the time of purchase due to a “few cosmetic damages to the vehicle” that she noticed upon inspection. The consumer paid a holding deposit of $400.00 on 7 July 2019 by debit card which was receipted by the trader. The consumer contends that she paid the balance of the purchase price, being $4,100.00 in cash on 17 July 2019 when she collected the motor vehicle. She has submitted bank account records which show the withdrawal of $4,500.00 in five transactions in the days prior to and on 17 July 2019, which she contends were for the purchase price. The consumer contends that she had to use five transactions because withdrawals from her account are subject to a daily limit of $1000.00.

11. In addition to her own affirmed evidence as to the purchase price paid, the consumer has submitted into evidence a statutory declaration made by Zasch Laurie, dated 8 October 2019. In that declaration Mr Laurie states as follows:

On the 07/07/19 I witnessed Eloise Bertinat pay Sam Estephan an eftpos deposit of $400.00 for a BMW E46 325CI with the registration of CT95GO, with the agreed upon final price being $4,500.00. Then on the 17/07/19 I was present whilst Eloise Bertinat paid the remainder of the agreed price in cash in full, to a sum of $4,100.00. The sale price was listed on the sale document as $2,500.00 at the suggestion of Sam Estephan in order to make the transfer of registration fee less than it would have been had the sale price been listed as the purchase price of $4,700.00

12. Having heard the parties’ oral evidence and after considering the objective and surrounding facts I am satisfied that the consumer paid a purchase price of $4,500.00 for the motor vehicle. The consumer's oral evidence on this point was compelling, internally consistent, and consistent with the objective facts and surrounding circumstances. In particular it was consistent with the price at which the trader had offered the motor vehicle for sale on the internet. Although the Form 5 dated 24 April 2019 does state the cash price as $4,400.00 rather than $4,500.00 that fact generally supports the consumer’s claim as to the purchase price she paid rather than the trader’s claim (the trader does not contend that the consumer paid $4,400.00 for the motor vehicle). I am satisfied the consumer told the truth.

13. I am not satisfied Mr Estephan told the truth. His evidence was glib and evasive. It was inconsistent with objective facts and surrounding circumstances. In particular, Mr Estephan's evidence as to why the motor vehicle was advertised for sale at $4,700.00 (or $4,400.00) but sold at a price of $2,500.00 could not be believed. In summary, he claimed that the advertised price bears no relationship to the value or sale price of the motor vehicle which is negotiated with the customer when they come in. He claimed that in this case he told the consumer that the motor vehicle was words to the effect of ‘rubbish’ (I cannot recall the precise word or words he used) and was only worth $2,500.00 which is what he sold it to her for. That evidence directly contradicts his other oral evidence and submissions which were to the effect that the motor vehicle was roadworthy at the time of sale and had passed a recent e-Safety check.

14. At the time the consumer paid the trader the $400.00 deposit for the motor vehicle on 7 July 2019 he issued her with a handwritten receipt which states as follows:

I Sam Estephan from Car & Commercial Sales MD062312 have taken a $400 EFTPOS deposit from Eloise Andreg Locker of [address]

Things to do

supply 3 months rego

clean in and out

spray wheels

stick rear view mirror on

and have ready by Wednesday and if customer change their mind for any reason they will lose their deposit

15. The trader obtained an e-Safety Check Report for the motor vehicle on 8 July 2019 from a licensed motor mechanic trading as Autocare Solutions. The motor vehicle passed the e-Safety check. The odometer reading stated on the e-Safety Check report is 239387kms. As already noted, the consumer paid the balance of the purchase price and collected the motor vehicle on 17 July 2019.

16. On 25 July 2019 the consumer took the motor vehicle for a routine service by a licensed motor mechanic, Mr Elben Bongat, trading as Priority Mobile Services. In course of the inspection, Mr Bongat detected major oil leaks from the motor vehicle’s engine which he considered made it unsafe to drive. The quotation for repairs he produced based on his inspection is in evidence. It states:

Note: Major oil leaks from Engine Oil Sump Gasket. Needs to be Replaced ASAP. Not recommend to drive the vehicle to prevent damage to the engine. Oil is dripping to the ground.

Engine warning light is on all the time.

Coolant warning light is on all the time.

The quotation also records the odometer reading as 240028kms. Mr Bongat quoted the consumer $1248.50 to repair the oil leaks.

17. The trader contends that because the motor vehicle passed an e-Safety check on 8 July 2019 the oil leaks must have occurred after the consumer took possession of it. Although not entirely clear, in his evidence and submissions the trader appears to suggest that the consumer did something to cause the oil leaks. There is no evidence to support such a conclusion.

18. The consumer has submitted into evidence a Statutory Declaration made by Mr Bongat on 15 October 2019. In that Statutory Declaration Mr Bongat states as follows:

On 25.07.19 Eloise Bertinat brought a black BMW e46 with registration CT95G0 to my place of work for a general service. On this day I told Eloise that the car leaked a lot of oil. Oil leaked onto the ground under the car. I asked her how long she had the car. She told me she bought it one week earlier. She told me the car had just passed pink slip check provided by Car and Commercial Sales. I was concerned about this as a car should not pass this check with this amount of oil leaking. I advised her to call Fair Trade. I took photos of Eloise’s car, and gave her a quote for repairs on this same day.

…

19. The consumer contacted NSW Fair Trading for advice. That resulted in the consumer contacting the trader by telephone on 25 July 2019 to complain about the condition of the motor vehicle at the time of sale asserting that it could not have passed an e-safety check in the condition in which was sold and requesting it be repaired by the trader. The consumer later confirmed the contents of this conversion in a letter of that date which states in part:

… As per the conditions of the sale, the car was to be made roadworthy with registration. This means that the vehicle needed to pass a pink slip. I have taken the vehicle to Priority Mobile Services for a routine service on 25/7/19. At this service the mechanic discovered a major oil leak on the car that would deem it un-roadworthy. This means the car should not have been able to pass pink slip checks. Had I known about this issue I would not have purchased the vehicle.

This product is not of satisfactory quality or fit for the purpose described.

To resolve the problem I request that you repair the oil leak issues. Enclosed is a copy of the written agreement by you to supply 3 months registration for the vehicle, and a quote from the mechanic for repairs to be made.

…

20. As a result of the consumer’s representations, the trader agreed to accept the return of the motor vehicle and to inspect the oil leaks from the engine. He confirmed this in an email to the consumer on 25 July 2019 as follows:

Thanks for sending me that information. So I will see you sometime tomorrow so I can take the vehicle from you and I will have my mechanic go over the mechanical work you have mentioned in that quote from your mechanic. And we will discuss this after I find out what my mechanic says. So I’ll see you tomorrow thanks

21. The consumer returned the motor vehicle to the trader on 26 July 2019. On 31 July 2019 the trader telephoned the consumer to advise her that the motor vehicle had been repaired and was ready for collection. She collected it from the trader on 1 August 2019 and immediately took it to Priority Mobile Services for inspection of the work the trader had purportedly carried out. Mr Bongat advised the consumer that the oil leaks had not been repaired. In this respect in his Statutory Declaration Mr Bongat states:

On 1.08.19 Eloise brought the same black BMW back to me for a follow up service. She told me that she had taken the car back to Car and Commercial Sales to get the oil leaks fixed. I checked the car and saw that it still leaked a lot of oil beneath the car. The oil leaks had not been fixed, and the car still not roadworthy. I told her the car should not be driven because of the mechanical issues with it.

22. As a consequence, the consumer immediately made a formal complaint to NSW Fair Trading. This resulted in a NSW Fair Trading Automotive Inspector, Mr Dimitrios Chiraz, inspecting the motor vehicle on 16 August 2019 in the presence of the consumer. Prior to this inspection, the motor vehicle’s registration was due for renewal. The consumer presented it to a licenced motor mechanic, Darkos Automotive Services Pty Ltd, on 5 August 2019 for an e-Safety check. The motor vehicle failed the e-Safety check, with the mechanic commenting “engine oil leaking, rear diff mount broken, flex donut on drive shaft torn”.

23. The trader was provided with the opportunity, but declined to be present at the NSW Fair Trading Automotive Inspection. In the course of the inspection Mr Chiraz detected a number of major defects in the motor vehicle as a result of which he concluded “vehicle is deemed unroadworthy + defective”. Those defects were:

Engine oil leaks from sump and oil dipstick

Mounts – front driveshaft coupling deteriorated and broken – rear gearbox mounts broken – rear diff mount broken …

Both front headlamps faded lens

Rear window tint bubbled (poor vision)

Rear tail lights in boot faded

Rear exhaust muffler leaking (not from drain holes)

Front … grill and window seal deteriorating and broken/damaged

Tinted window on vehicle appears to be excessively dark …

24. In his oral evidence and submissions the trader claims that Mr Chiraz was biased against him, was pursuing some form of personal vendetta against him, and had some form of personal relationship with the consumer. These were wild allegations advanced without any evidence. The consumer denies that she knew Mr Chiraz before the motor vehicle inspection, and I accept her evidence in this regard. I also reject the trader’s attempt to impugn Mr Chiraz’s integrity and the findings he made as to the motor vehicle’s defects. Apart from there being no evidence to support the trader’s allegations, Mr Chiraz’ findings are consistent with those made by two other licenced motor mechanics, Mr Bongat and Darkos Automotive Services Pty Ltd.

25. The trader also contended in his evidence and submissions that upon being first contacted by Mr Chiraz he offered to accept the return of the motor vehicle and refund the consumer its purchase price. He contends that the consumer’s pursuit of her claim from this point was an attempt by her to “destroy his business” and his reputation, which was motivated by personal malice. The consumer denies that such an offer was ever communicated to her by the trader or Mr Chiraz. The trader has submitted no objective evidence that such an offer was ever made and rejected by the consumer. The consumer has only sought return and refund by way of remedy in these proceedings. It is therefore quite implausible that she would have instituted these proceedings if that remedy was already available to her. I therefore declined to believe that the trader ever made the consumer such an offer. I accept the consumer’s claim at face value. It is an attempt to obtain a remedy available at law in circumstances where it was refused by the trader prior to the institution of the proceedings. The proceedings are not oppressive or an abuse of process as asserted by the trader.

26. Following the outcome of the NSW Fair Trading Automotive Inspection, the consumer wrote to the trader by email on 26 August 2019 to reject the motor vehicle and request a refund of its purchase price. Her letter states in part:

I am writing in regards to a full refund of $4500 for the BMW e46 325ci with registration number CT95G0 that I purchased from Car & Commercial Sales on July 17, 2019

The condition of the vehicle is not roadworthy. This was investigated and confirmed with the Fair Trade case taken against the vehicle. The case was concluded with an inspection of the vehicle on August 16, 2019. The recommendation made by the Fair trade automotive inspector Dimitrios Chiras was that the vehicle be refunded (sic) to the trader due to its defective status.

Under Australian Consumer Law I am eligible for a full monetary refund for the following reasons: the vehicle is substantially damaged and unfit for its intended purpose, and had I been aware of such issues prior to purchase, I would not have brought this vehicle, I therefore request a full refund of $4500 to be made to my bank account for the return of the vehicle to Car & Commercial Sales.

..

27. The trader did not respond to the consumer’s rejection of the motor vehicle, which has resulted in the consumer instituting these proceedings.

28. The trader contends that if the Tribunal determines that he has failed to comply with the guarantee as to acceptable quality in the supply of the motor vehicle to the consumer, this was not a major failure. He contends that the Tribunal should therefore make orders requiring him to repair the motor vehicle so as to make it roadworthy.

Jurisdiction

29. There is no issue that the Tribunal had jurisdiction to hear and determine this application as a consumer claim under the provisions of Part 6A of the FT Act.

Applicable law

30. The applicant’s cause of action is found in the guarantee as to acceptable quality in the supply of goods found in section 54 of the Australian Consumer Law (NSW) (ACL) which is made part of the law of NSW by section 28 of the FT Act. If a person supplies goods in trade and commerce (and not by auction) there is a guarantee as to acceptable quality: sub-section 54(1). Goods are of acceptable quality if they are as fit for all the purposes for which goods of that kind are commonly supplied, they are acceptable in appearance and finish, and are free from defects, safe and durable: subsection 54(2)(a) to (e). The test for these qualities is an objective one. It is what a “reasonable consumer” fully acquainted with the state and condition of the goods (including any hidden defects of the goods) would regard as acceptable having regard to the nature of the goods, the price paid for them, any statements made about the goods in advertising materials, any representations made about the goods by the supplier or manufacturer of the goods, and any other relevant circumstances relating to the supply of the goods: subsection 54(3).

31. Subsections 54(4) to (7) set out several bases upon which a supplier will not be liable for the supply of goods that are not of acceptable quality. Relevantly to the circumstances of this case, goods are taken to be of acceptable quality if the only reason why they are not of acceptable quality was specifically drawn to the consumer’s attention before the consumer agreed to the supply (section 54(4)(b)) and if the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality (section 54(6)((a)). Additionally, goods do not fail to be of acceptable quality if the consumer acquiring the goods examines them before the consumer agrees to the supply and the examination ought reasonably to have revealed the goods were not of acceptable quality (section 54(7)).

32. In Burton v Chad One Pty Ltd [2013] NSWDC 301 at [38] to [42] Olsson DCJ sets out a useful summary of the approach and the principles to be applied in the construction of section 54:

38   The decision of the Auckland Motor Vehicle Disputes Tribunal in Witton v Taupo Motor Company Limited 29 November 2010 contains a helpful analysis of the equivalent New Zealand provision of s.54:

"The guarantee of acceptable quality contained in s.54 is in three parts. A set of quality elements contained in s.54(2)(a) to (e), a reasonable consumer test which applies a consumer's objective evaluation of those quality elements, and a set of factors in s.54(3)(a) to (e) which are to be taken into account by the reasonable [consumer]."

39   The New Zealand High Court in Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [86] and following, said:

"The quality standard is set by reference to the expectations of a reasonable consumer "fully acquainted with the state and condition of the goods, including any hidden defects." The phrase derives from s 16(b) of the Sale of Goods Act 1908, which established an exception to the warranty of merchantable quality of goods bought by description from sellers dealing in goods of that description. The warranty does not apply where the buyer had examined the goods, as regards defects which such examination ought to have revealed."

40   The court referred to Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 and continued at [88]:

"...s 7(1)(a) of the Consumer Guarantees Act [the equivalent of s.54 of the ACL] requires that quality be assessed by reference not only to defects and price but also fitness for purpose. Fitness for purpose is assessed by reference to all purposes for which the goods are commonly supplied, so it does not suffice if the goods are suitable for any one or more of their common purposes (compare Hardwick Game Farm v Suffolk Agricultural Producers Association [1969] 2 AC 31). But it is not an absolute requirement, in that the Act does not positively require that the goods be fit for all common purposes."

41   At [94] the court said:

"The hypothetical reasonable consumer is taken to be fully acquainted with the "state and condition" of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances.

Acceptable quality is a composite and context-specific attribute. I adopt the observations of Ormrod LJ, speaking of merchantable quality, in Cehave NV v Bremer Handelsgesellschaft mbH at page 80:

'It is a composite quality comprising elements of description, purpose, condition and price. The relative significance of each of these elements will vary from case to case according to the nature of the goods in question and the characteristics of the market which exists for them. This may explain why the formulations of the test of merchantable quality vary so much from case to case.'"

42 Applying that to the present situation, it is apparent that such authority as there is on the NZ equivalent provision of s.54(3) makes it clear that all of the matters in that sub-section are to be considered when determining whether or not the goods were of acceptable quality. The use of the conjunctive "and" within the section supports this interpretation.

33. The temporal focus of section 54 is the time the goods are supplied, informed by what is known of their subsequent condition and by what it was reasonable to expect from the type of goods in issue: see generally, Medtel Pty Ltd v Courtney [2003] FCAFC 51 per Moore J at [40], Branson J at [70], and Jacobson J agreeing with Branson J at [81]. In this respect, it falls to the consumer to prove on the balance of probabilities that the motor vehicle was not of acceptable quality at the time of supply having regard to what it was reasonable to expect in terms of its future function at that time. To the extent that the consumer contends that this was because the motor vehicle was not free from defects (subsection 54(2)(c)) she must establish that there was an actual or latent defect in the motor vehicle at the time of supply which rendered it of unacceptable quality: Alliance Motor Auctions Pty Ltd v Saman [2018] NSWCATAP 137 at [14] to [23]. However, it is not necessary for the applicant to prove the precise nature of the defect: Matumaini v Automobile Industries Pty Ltd [2017] NSWCATAP 93 at [73]; Alliance Motor Auctions Pty Ltd v Saman [2018] NSWCATAP 137 at [23]; Munday v Empire Auto Group Pty Ltd [2019] NSWCATAP 52 at [9].

34. Section 259 of the ACL sets out the remedies that are available to a consumer where a supplier of goods has failed to comply with the guarantee as to acceptable quality. Relevantly to the circumstances of this case, if the failure to comply with the guarantee can be remedied and is not a major failure, the consumer may require the supplier to remedy the failure within a reasonable time: s 259(2)(a). If such a requirement is made of the supplier but the supplier, or fails to comply with the requirement within a reasonable time, the consumer may, subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection: section 259(2)(b).

35. If the failure to comply is a major failure, the consumer may, relevantly to the circumstances of this case and subject to section 262 of the ACL, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection: subsection 259(3)(a).

36. Section 260 of the ACL sets out the circumstances in which a failure to comply with the guarantee as to acceptable quality will be a “major failure” Relevantly to the circumstances of this case there will be a major failure if the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure (subsection 260(a)) or the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose (subsection 260(d)) or the goods are not of acceptable quality because they are unsafe (subsection 260(e)).

37. In Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80 the Appeal Panel of the Tribunal set out a useful summary of the approach and principles to be applied in the construction of section 260:

85 Section 260 of the ACL (NSW) sets out five measures against which non-compliance is to be assessed for the purposes of determining whether there is a “major failure”. As observed by the Magistrates’ Court of Victoria in Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [50], for there to be a major failure it was not necessary for the claimant to establish each of the matters set out in s 260, establishing one is sufficient. This is clear from the drafting of the section.

86   The first measure, under s 260(a), is whether “the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure”.

87   Subsection 260(a) applies to a generic “reasonable consumer” who acquires goods. It has the broadest and most general application. In contrast, s 260(d), where goods are unfit for a disclosed purpose, only applies when there have been specific negotiations about purpose between a consumer and a supplier. Similarly, s 260(b) only applies where goods have been acquired by description, sample or as a demonstration model.

88   Subsections 260(c) and 260(e), namely where goods are “substantially unfit” or where they are “unsafe”, direct specific attention to the nature and extent of the failure. Whereas s 260(a) directs attention to the mind of the reasonable consumer, although the nature and extent of the failure is relevant in a contextual sense. There is an overlap between ss 260(a), 260(c), and 260(e). For instance, if it is established that goods are unfit for the purpose for which goods of the same kind are commonly supplied and that they cannot be remedied easily or in a reasonable time, it follows that a reasonable consumer, fully acquainted with this fact, would not have acquired the goods. The same can be said of goods that are found to be unsafe. However, the reverse is not true. Subsections (c) and (e) require proof of specific factual matters in relation to the nature of the failure in the goods, subsection (a) does not.

89 Subsections (a), (c) and (e) of s 260 are closely linked to the consumer guarantee of “acceptable quality” under s 54. Relevantly, s 54 requires that, among other things, goods be “fit for all purposes which goods of that kind are commonly used” and “safe” which is to be adjudged by the “reasonable consumer fully acquainted with the state and condition of the goods”. As such, the inquiry as to whether goods comply with the guarantee of acceptable quality and any findings about this matter will be relevant to the inquiry about whether such failure is a major failure for the purposes of s 260.

38. The Appeal Panel went on to distil at [101] and [102] the following principles to be applied in determining if there is a major failure to comply with the guarantee as to acceptable quality:

1. 1.   A major failure may be constituted by one defect or a series of specific or individual defects which, when taken as a whole, constitute a major failure;

2. The test of whether goods “would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure” is an objective one.

3. A “reasonable consumer” would expect teething problems, even in a new vehicle.

4. The question to ask is whether the reasonable consumer, given the option of acquiring particular good or alternatively purchasing either nothing or a different model, would not have acquired the good.

5. Defects which result in goods failing to comply with the guarantee of acceptable quality will not invariably be a major failure and it will depend on the nature and extent of the failure; and

6. The cost of repair, in proportion to the purchase price, and the question of whether the defects can be remedied easily and in a timely manner are relevant considerations.

7. In our view, the purchase price for the goods and the nature of the defect are also relevant considerations for a “reasonable consumer”.

   39. Section 262 of the ACL limits the circumstances in which a consumer is entitled to reject goods. A consumer is not entitled to notify a supplier of goods that the consumer rejects goods if, relevantly, the rejection period has ended: subsection 262(1)(a). The “rejection period” for goods is the period from the time of supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a consumer guarantee to have become apparent, having regard to the type of goods, the use to which the consumer is likely to put them, the length of time for which it is reasonable for them to be used, and the amount of use to which it is reasonable for them to be put before such a failure becomes apparent: subsection 262(2).

   40. Section 263 of the ACL sets out the consequences for the consumer and the supplier if the consumer rejects goods. Relevantly, the consumer must return the goods to the supplier unless the goods cannot be returned without significant cost to the consumer: section 263(2). If that is the case the supplier must collect the goods at its expense: section 263(3). The supplier must also in accordance with an election made by the consumer either refund and money paid by the consumer for the goods, and an amount that is equal to the value of any other consideration provided by the consumer for the goods, or, replace the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier: subsection 263(4). If the property in the rejected goods had passed to the consumer before the rejection was notified, the property in those goods revests in the supplier on the notification of the rejection: subsection 263(6).

   41. The consumer bears the onus of proving her case on the civil standard of proof, which is the balance of probabilities: Briginshaw v Briginshaw (1938) 60 CLR 336. This standard of proof was described by Lord Denning in Miller v Minister for Pensions [1947] 2 All ER 372 [at 374] as requiring the Tribunal to be satisfied that an alleged fact was “more probable than not”. However, the Tribunal must “feel an actual persuasion of [the alleged fact’s] occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality ” … [the occurrence or existence of the fact must be established]… to the reasonable satisfaction of the Tribunal”: Briginshaw [at 361-2].

Consideration

42. Having regard to the consumer’s cause of action, the material facts and contentions of the parties, and the applicable law, the questions the Tribunal must pose and answer in order to determine the outcome of this application may be stated as follows:

1. Did the trader fail to comply with the guarantee as to acceptable quality when he supplied the motor vehicle to the consumer?

2. If so, was this a major failure?

3. If so, did the consumer reject the motor vehicle within the rejection period?

4. If so, what remedy is the consumer entitled to?

5. If a major failure has been established, is the trader entitled to remedy the contravention by repairing the motor vehicle in spite of the consumer’s rejection of it?

43. I am comfortably satisfied on the evidence before me that the trader failed to comply with the guarantee as to acceptable quality in the supply of goods when he supplied the motor vehicle to the consumer. Within 10 days of the supply the motor vehicle was found by a licensed mechanic to have a serious oil leak from its engine which meant that it was not safe to drive. In this respect the motor vehicle was not fit for the purpose for which it was supplied (it was not roadworthy), it was not free from defects, and it was not safe. Although the consumer paid a relatively modest price for the motor vehicle compared to motor vehicle costs generally, $4,500.00 is nevertheless a substantial sum of money by the standards of ordinary people. A reasonable consumer would expect a motor vehicle supplied at this price to be roadworthy, particularly given that the motor vehicle was advertised by the trader as being roadworthy, and in “good condition”, enabling the consumer to “drive away no more to pay”. I am also satisfied on the evidence that the trader made verbal and written representations to the consumer to this effect prior to and at the time she purchased the motor vehicle. I am satisfied that a reasonable consumer would not consider the motor vehicle to be of acceptable quality if they knew at the time of its supply that it had a serious oil leak that rendered it un-roadworthy and unsafe to drive.

44. The trader has sought to contend that he told the consumer that the motor vehicle was words to the effect of ‘rubbish’ prior to her purchase of it. However, as I indicated above I reject this evidence as untruthful. It is entirely inconsistent with the contents of the trader’s advertising of the motor vehicle and with the representations made by the trader at the time of sale that the motor vehicle would be supplied with “3 months rego”. The consumer denies that the trader ever said anything of this nature to her and I believe her. The motor vehicle is thus not rendered of acceptable quality because its defects were specifically drawn to the attention of the consumer by the trader prior to her purchase of it.

45. The trader has also sought to contend that the oil leak occurred after the time of supply and he appeared to suggest that the consumer did something to make this occur. The evidentiary basis for these contentions is the e-Safety certificate issued in respect of the motor vehicle by Autocare Solutions on 8 July 2019. I do not accept either contention. The oil leak was discovered within 10 days of the supply of the motor vehicle and it was a serious oil leak. In his evidence Mr Bognat expresses concern that an e-Safety certificate was issued with the motor vehicle in that condition. It is implicit in this evidence that he was satisfied that the oil leak must have been present at the time of the e-Safety inspection and therefore at the time of the motor vehicle’s supply to the consumer.

43. In any event, even if the oil leak was not manifest at the time of supply, I am satisfied that there was a latent defect in the engine at the time of supply which caused the oil leak shortly thereafter. That is because of the very short period from the time of supply until the oil leak was identified by Mr Bognat. The consumer had hardly used the motor vehicle at all by that time. It is difficult to ascertain the exact extent of use because the trader has stated two different odometer readings on the Form 5, and both are less than the odometer reading stated on the e-Safety Check Report issued by Autocare Solutions on 8 July 2019. However, it is clear that it did not exceed 1028kms and that it may have been as little as 641kms. The oil leak could not be the result of wear and tear in these circumstances. Nor is there any other evidence that the consumer caused the oil leak. There is no evidence that the motor vehicle was involved in an accident, for example. The motor vehicle was thus not rendered of acceptable quality at the time of supply because it became of unacceptable quality due to conduct by the consumer following its supply.

44. The consumer had the opportunity to inspect the motor vehicle prior to purchase. However, I am not satisfied that she was reasonably capable of discovering the oil leak upon her examination of the motor vehicle. She is a lay person, she is not a mechanic or other person with automotive expertise. It appears she did not see any evidence of an oil leak and nor was she put on notice that such a possibility should be investigated. The trader had represented to her that the motor vehicle was roadworthy and in good condition and that it had recently passed an e-Safety Check and would be sold with 3 months registration in place.

45. The trader’s failure to comply with the guarantee as to acceptable quality was a major failure on several independent bases. First, I am satisfied that a reasonable consumer would not have acquired the motor vehicle if they had been acquainted with the nature and extent of the oil leak. They would have acquired an alternative motor vehicle that was roadworthy, or alternatively, not acquired any motor vehicle. That is because the motor vehicle was being acquired by the consumer for regular on-road use. It was not fit for that purpose without substantial repairs that would cost more than a quarter of its purchase price. Second, the motor vehicle was not fit for the purpose for which it was supplied for the reason just stated and it could not be made fit for purpose without the consumer incurring significant expense. Third, the motor vehicle was not safe. Fourth, the consumer provided the trader with an opportunity to repair the motor vehicle to make it of acceptable quality, but the trader failed to cause the necessary repairs to be carried out. It was returned to the consumer with the oil leak still extant.

46. The consumer was thus entitled to, and did, reject the motor vehicle. She did so on 26 August 2019 by email and letter to the trader stating her reasons for doing so as required by section 259 of the ACL. I am satisfied that by that date, which was just under six weeks from the date of supply, the rejection period for the motor vehicle had not ended. In general terms that is because the goods in question in this case is a motor vehicle that was sold to the consumer on her understanding that it was roadworthy and in good condition at a cost of $4500.00, which as I have stated above may be a modest cost for a motor vehicle but still a substantial sum of money by the standards of ordinary people. More specifically, the motor vehicle was sold on the basis that it had passed an e-Safety check on 8 July 2019 and would be registered (and thus roadworthy without further significant repair or maintenance) for 3 months. That 3 month period had not ended. Additionally, the consumer had engaged in limited use of the motor vehicle, driving it for not more than 1028km and possible as little as 641kms

47. By operation of 263 of the ACL, as a consequence of her rejection of the motor vehicle, the consumer must return it to the trader. As the motor vehicle cannot be driven and can only be returned at significant expense to her in towing or transport fees she must do so by making it available for the trader’s collection at the trader’s expense. The trader is bound by the consumer’s election to reject the motor vehicle and return it. He is not entitled to repair the motor vehicle in substitution for the return of the motor vehicle to him. In return he must refund the consumer the purchase price she paid for the motor vehicle, which for the reasons stated above, I have found was $4500.00.

Conclusion

51. The consumer has established that the trader failed to comply with the guarantee as to acceptable quality when he supplied the motor vehicle to her, and that this was a major failure. She has elected to reject the motor vehicle and did so within the rejection period. She is thus entitled to orders that will require the trader to accept the return of the motor vehicle and refund her the purchase price she paid for it, which was $4500.00.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 29 March 2022